MILAN/DETROIT (Reuters) — Chief
Executive Sergio Marchionne's merger of carmakers Fiat and Chrysler
will probably entail a U.S. share listing that cements North America
as the group's new centre of gravity and further sidelines Italy.

Two sources close to Fiat said it was likely to move its primary
listing to New York as early as 2015 after a merger with Chrysler,
the third-largest U.S. automaker, heralding a politically delicate
shift of focus that reflects the operating facts.

Chrysler already made more than half the group's first-half revenue,
turning what would have been a 501 million euro ($690 million) loss
for Fiat alone into a 435 million euro profit, while Fiat plants in
Italy tick along at just 41 percent capacity, according to 2013
estimates from IHS Automotive.

A listing move would help Marchionne distance himself from troubles
in Europe, where thousands of Fiat's Italian workers are on
state-backed temporary lay-off schemes, highlight its gains in the
United States and convince a larger pool of investors that the
merged company can take the fight to rivals General Motors and Ford
Motor Co.

"With a U.S. listing, the whole investment story and the way in
which people think about this company may change," said
International Strategy and Investment analyst George Galliers.

"Today people think of Fiat as a weak European player with a good
exposure to South America and exposure to North America through
Chrysler," he added. "Once you have a U.S. listing, people are more
likely to think of the entity in the same context as they do Ford
and GM."

While the northern Italian city of Turin has been Fiat's seat for
the past 115 years, "the brain and muscles are in the United States;
the centre of gravity has moved to the other side of the ocean",
Luciano Gallino, a sociologist who specializes in labor market
changes, was quoted by ANSA news agency as saying.

The listing and the likely establishment of a group headquarters
outside Italy will alarm some in that country's government and
unions who want to protect jobs, but it will delight investors who
want cost cuts and closures, observers said.

Fresh from negotiating a landmark buyout deal to take full control
of Chrysler, Marchionne can now draw on his earlier experience
combining the spun-off Fiat Industrial with CNH to create a
U.S.-listed manufacturer of agricultural vehicles.

CNH Industrial has a primary listing in New York, a secondary one in
Milan, is registered in the Netherlands, and has its fiscal domicile
in Britain. Fiat declined to comment on what will happen to
Fiat-Chrysler after the merger.

UNPOPULAR POLITICALLY

A shift away from Italy would not be popular to a fragile coalition
government desperately trying to protect jobs, but analysts said
Rome's hands are tied, with few tools at hand to help revive car
sales in Europe.

"They will again bark once the news of a listing move to New York is
cemented, but ultimately there is little they can do," a Milan-based
analyst said. "We are dealing with a difficult market in Europe,
especially in Italy, while growth is elsewhere. The government is
well aware of that."

Fiat and Rome last year pledged to work together to relaunch Italy's
recession-hit car market following the government's insistence that
Fiat "stay in Italy", even after a merger with Chrysler.

Since last week's news politicians and most union leaders have
hailed the merger as a boost for Italy, careful not to antagonize
the country's largest private-sector employer.

They expect the deal to channel investment into Italian factories
that will allow Fiat to launch new models into what analysts expect
to be a steadying market from 2014.

In an interview published in Il Sole 24 Ore on Sunday, Industry
Minister Flavio Zanonato said Marchionne had already assured Rome
about Fiat's presence in Italy.

"In a phone conversation on Thursday, (Marchionne) expressed his
intention to keep strong roots in Italy," the minister said. "He
confirmed he has in mind a strengthening in our country. Fiat
already has a plan to increase the effort put into new models
produced in Italian factories."

Zanonato said the merger, which would combine the technology, dealer
networks and cash of the two companies, could only be positive for
Italy.

"How can a country not be satisfied by a deal ... which opens new
perspectives in foreign markets? The development of the foreign
network is a smart choice," he said.

Zanonato said Rome was considering moves to revive Italy's car
market, including incentives for alternative-fuel vehicles and
fiscal measures to boost exports, but did not elaborate.

But some unions and politicians asked for more binding commitments
that Fiat would indeed put in the money it has promised to revamp
underutilized plants.

"Our worry is not that Fiat will stop producing cars in Italy,
because they cannot ignore the Italian market," said Federico
Bellono, general secretary of Fiom union's Turin branch. "But we
fear that the investments that will be made in Italy will be much
lower than one could have expected."

Some are sceptical after Fiat scrapped a 2010 plan to invest up to
20 billion euros ($27 billion) to more than double output in Italy
after market conditions deteriorated, worrying the same could happen
as Fiat's attention drifts elsewhere.

The carmaker has repeatedly reassured it does not intend to close
factories, unlike mass-market competitors Ford, General Motors and
Peugeot SA. It has also confirmed its intention to build Jeeps and a
new line of Alfa Romeos in Italy for export to markets in Asia,
Latin America and the United States. Detailed investment plans will
be outlined at the end of April, it has said.

But analysts said the investments that come through are likely to be
in single-digit billion euros, not enough to preserve all jobs.
Analysts estimate Fiat would need to triple production of cars in
Italy to re-employ all of the thousands of workers still temporarily
laid off.

Ultimately, the merger will merely emphasize the diminishing stature
of the Italian car industry, which in recent years has shrunk to
levels last seen in the 1970s, they said.

"Italy is already a province in the Fiat empire," Fiom's Bellono
said.